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Parrot Protocol's Controversial Move to Become Tokenless: What You Need to Know

By: illustrious
July 24, 2023 3:50 PM EDT
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In a sudden and controversial move, Parrot Protocol — a well-known liquidity network on the Solana blockchain — has proposed the redemption of its native PRT tokens. The team aims to transition towards a protocol without any tokens, creating a stir in the community.

The Proposal at a Glance

Until July 27, community members are voting on the proposal that entails:

  • Redeeming PRT tokens at a rate of $0.0045 each.
  • Transitioning to a no-token protocol.

While Parrot raised an impressive $89 million since its 2021 inception, the current return on investment (ROI) stands at a worrying -89% for those who participated in the initial DEX offering (IDO) and the initial exchange offering (IEO).

The Ambiguity Surrounding the Proposal

The team has remained relatively tight-lipped on the reasons behind such a radical move. The proposal highlights that "many PRT holders would like to redeem their PRT tokens for their treasury value.” Yet, this gives little insight into the strategic or financial motivations behind the decision.

This isn't the first time Parrot has made surprising amendments. In November 2022, there was a significant change in Parrot's tokenomics, as the protocol shortened its token locking period dramatically, from 12 months to just seven days. The purported rationale? To "create more flexibility for stakeholders."

Community Skepticism and Concerns

Claims have been circulating that the Parrot team holds control over 81% of all tokens, raising concerns about centralization and the true democratic nature of the voting process. Parrot's team, however, quickly moved to counter these rumors, emphasizing on Twitter that treasury tokens have not been used or touched for governance purposes.

Still, data from CryptoRank does show that 35% of tokens were distributed as protocol incentives, 20% were allocated to the team and angel investors, 10% for public sales, 20% for seed rounds, and the remaining 15% categorized as others.

There's also the matter of the unclaimed funds. The proposal remains silent on what happens to any funds not claimed after the eight-week redemption window. Speculations abound, with some suggesting that these could be pocketed by insiders.

One community member expressed their frustration stating, “The pro-rata value is an extreme lowball and fails to account for many of the team’s misuses of the treasury without the community’s consent."

Concluding Thoughts

Parrot Protocol's move to go tokenless is a significant event in the decentralized finance (DeFi) space, particularly for a project that had previously garnered such attention and funding. The lack of clarity and communication from the team has understandably led to apprehension and skepticism among community members.

The vote's outcome and its ramifications on the protocol's future remain to be seen. Yet, this incident serves as a reminder of the evolving nature of the DeFi landscape and the importance of transparent governance mechanisms.

Always experimenting.

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